From Visa Vows to the O factor- What exactly is going wrong with the great Indian IT Industry?

The great IT industry of India is in trouble. Recession, stiffer competition and highly demanding clients are giving the vendors very limited space to breathe. Issues after issues are cropping from nowhere and the answers are not within sight. The industry is divided. Some say these are company specific issues where as some argue these are industry specific. Infosys and Wipro tried hard to defend their weak performance, whereas TCS celebrated its first ever $10 billion annual revenue. What is it that is plaguing the once mighty Indian IT industry? Let’s try and analyze.

Visa Woes
The rejection rates are increasing. The restrictions are increasing too. And on top of it is getting more expensive. WSJ reported that India is planning to file a formal complaint to the World Trade Organization against the U.S. over its visa policies for a while. Although the US law doesn’t explicitly target Indian IT companies, they are the one to be most affected by the law.

Companies like Wipro Ltd., Tata Consultancy Services Ltd., Infosys Ltd. have been singled out, as examples of companies that exploit two particular types of work visas, H-1B and L-1. Nasscom too said rejections across visa categories have risen drastically over the past year could be as high as 40%.

The popular perception prevailing in US is - "There isn’t any shortage of qualified IT/engineers who are U.S. citizens. They do not need more foreign workers coming to the U.S."

The problem isn’t with USA alone. India recently warned the United Kingdom about the problems faced by Indian IT professionals in getting visa to the European nation.

As per the insiders – “Indian IT companies have been facing problems in transferring their IT experts and high skilled workers to their UK based operations because the UK Border Agency treats intra-company transfer of IT experts as prospective immigrants. This has affected the operations of all the Indian IT companies having operations in the UK.”

Stephanie Moore, research analyst at Forrester in her observation said - The main problem remains with Infosys. She said - “Infosys’ continuing visa issues are causing concern for Infosys clients. While at first, the problem sounded isolated and related to a single whistle-blower, the continuing coverage suggests that the problem may be more widespread. Two recent events are increasing client concern. First, there was a CBS Morning News broadcast which seemed to support the original whistle-blower’s accusation. Then, Infosys itself disclosed that the U.S. Department of Homeland Security had found errors in a significant percentage of I-9 employment authorization forms. This, combined with Infosys’ somewhat anemic earnings announcement, has clients wondering what the future holds for Infosys.”


“To make matters worse, clients are puzzled by Infosys’ lackluster response to these very serious and potentially disruptive charges. For sure Infosys has denied all charges, but this is not a sufficient response to clients that rely on Infosys to keep the lights on every day. Clients are worried about things such as: increased attrition as Infosys employees begin to question Infosys’ long-term viability in the light of the visa controversy, slowing revenue growth and the recently announced wage freeze in the most competitive labor market in the world; the impact on Infosys visa-carrying employees if Infosys does “lose” the whistle-blower case or is penalized for irregularities in its I-9 processing; and the public relations risk if Infosys becomes an election year scapegoat for American job loss”

The State Of Denial

Indian Minister of State for Communications and IT, recently said in parliament that “Despite the rise of Philippines in the outsourcing sector, India remains the leader with estimated revenue of USD 15.9 billion from the segment in 2011-12”

As per estimates from the National Association of Software and Services Companies (Nasscom), the Indian IT-BPO sector is expected to aggregate revenues of over USD 100 billion in 2011-12.

If Government thinks that continuation of incentives to IT sector, which include allowing duty free import of goods will alone be good enough for the industry to survive, then it is at fault. It needs to undertake much more drastic steps, including improving the often questioned 
employable quality of our graduates.



The State of Uncertainty
The state of slow decision making, political infighting, moreover confusion about economic policies has taken the sheen off India’s rising economic profile. Though the new proposed controversial tax law General Anti-Avoidance rules (GAAR) has been deferred by one year even then, the market remains pessimistic. France just got a socialist leader. The European coalition will see the after effects soon. It will have ramifications on the international business too.

Slow Decision Making
In addition to it, slow decision making currently prevailing at the client’s level is hurting the fight back efforts. Contract deals are getting smaller and companies are fighting tooth & nail over them. Clients are demanding better pricing, greater risk sharing and of course better performance.

The O Factor
News reports confirm that barrack Obama’s new election campaign is releasing new ads targeting mitt Romney specifically on outsourcing Jobs to India when he was the Massachusetts Governor. The $780,000  ad campaign pitches “What about Mitt Romney? As a corporate CEO, he shipped American jobs to places like Mexico and China. As governor, he outsourced state jobs to a call center in India. He's still pushing tax breaks for companies that ship jobs overseas”. The spat will get uglier as the campaigning gathers more steam”

In short 2012 is one of those years which the IT industry would like to pass in a hurry.What was below par in the previous years is now being considered as the new normal.